We are aware of this issue and are working to resolve it. In the meantime, you can workaround this by putting your plush quaggan backpack on the left side of the transmutation screen. If you do that, then the button will not be grayed out.

Does this apply to other back pieces, like the starting engineer tool pack? Did I just need to put it on the other side of the transmutation window to make it work? (not at home so can’t test this yet)

Yep! This should work for the engineer starter back item as well… though it would only be an issue AFTER you already applied the skin to the Rawhide Leather Strap that comes with the backpack cover. The first time the cover is applied, it will be on the left by default, so you should not run into this.

I got the idea that I could replace the backpack it shows up when using an engineer kit for the plush. I was wrong. Now I wasted 300 gems on something I can’t even see!
I want a refund… I needed more claaivoyance before buying it and this post wasn’t much help

We are aware of the bug that equipping engineer kits will cover up your backpack. We are working to resolve this issue. Please contact Customer Support at support.guildwars2.com if you would still like a refund.